The Mystery of NSE’s land acquisition at Kohinoor City

July 16, 2009

On 14th May, the media began reporting the National Stock Exchange’s (NSE) purchase of 80,000 sq ft commercial space in one of the towers at Kohinoor City in Kurla. The reports said that the cost of acquisition was Rs1.2 billion (Rs120 crore) which meant a purchase price of Rs15,000 per sq ft. One newspaper even reported that NSE had made the acquisition because it was short of space at the NSE Plaza at the posh Bandra Kurla Complex.

The NSE does not appear to have corrected this view or reacted to a detailed press released from the Kohinoor Group, the developer of Kohinoor City. The news of NSE needing more space surprised us, since we learnt that NSE had plenty of office space to spare at the NSE Plaza, which had been rented out to various companies.

On 11th June we wrote to NSE asking for details based on various news reports. Admittedly, the questions included some inaccuracies, but NSE’s response was belligerent, even on issues that were part of Kohinoor’s press release.

Consider this…

“We deny that we have acquired 80000 sq.feet of space. Your facts are wrong. We deny that we have purchased the space at the rate of Rs.15,000/- per sq.feet. Your facts are wrong”.

It goes on to say, “We have entered into a purchase agreement with M/s. Kohinoor Planet Constructions Pvt. Ltd. for purchase of around 28000 sq.feet, at a price significantly lower than the price mentioned by you, for office space at their office block at Kohinoor City, Kurla (West), Mumbai to accommodate our expanding technology infrastructure needs, including near back-up Data Centre which needs to be away from main the Data Centre at BKC as per international norms. The acquisition has been done with the necessary Committee / Board approvals in accordance with the Board laid down procedure”.

The NSE threatened legal action against us for causing “irreparable reputational damage”.

We had also asked NSE if it had invested in a staff housing project with the same developer. It replied: “We further deny that we have made any acquisition for a staff housing project to provide subsidised housing facility to our staffs. This is completely baseless”.

Our investigations show that NSE may not have invested in a staff housing project, but seven senior staffers had booked some flats in building number 23 and 24. They negotiated a deal with Kohinoor Planet Constructions to get a rate of Rs6,000 per sq ft for the flats and all the 'selected' employees paid a booking amount of Rs100,000 each in September 2008.

The employees include Mr Yatrik Vin, Ms Kamala K, Mr R Sunderaraman, Mr CN Upadhyay, Mr Mahesh Haldipur and Mr K Hari, all in the rank of assistant vice president and above. We learn that the going rate for the apartments was approximately Rs10,000 per sq ft. when they were booked. That this was part of a corporate deal is inferred from the fact that the developer cancelled the allotment to NSE’s senior executive A Sebastin, after the bourse initiated action against him for quitting the exchange to join a rival stock exchange. Sebastin has since filed civil and criminal cases against NSE’s top brass for tarnishing his reputation through the publication of a public notice against him.

The story does not end here. After receiving NSE’s aggressive response we wrote to Kohinoor City and asked for a copy of the original press release from the developer. It was duly emailed to us. (separately attached).

Here is what it said: “Kohinoor Planet Constructions Pvt Ltd (KPCPL), the real estate arm of the Unmesh Joshi led Kohinoor Group, has inked a large property deal for office space at its prestigious township project Kohinoor City at Kurla, with National Stock Exchange (NSE), recently declared the world's largest bourse in terms of stock futures contract by the World Federation of Exchanges (WFE). NSE along with its group companies has purchased about 80,000 sq ft of office space in one of the four commercial towers coming up at Kohinoor City”.

It further quoted the Kohinoor City Project Head Atul Modak as saying, "We are delighted to ink this deal with NSE. While the deal for half the office space for about Rs 40 crore has already been sealed with NSE, the contract formalities for the rest of the office space for its group companies are under processing and will be completed shortly”.

Interestingly, our sources at the developer's office and in the real estate market continued to say that the deal was for Rs 120 crore at Rs15,000 per sq ft.

So we wrote to the NSE again for a clarification since it claimed to have purchased only 28,000 sq feet while the developer’s official press release said something different. We said, “Does this mean you had bought the total of 80,000 sq ft space for Rs 80 crore only?”

This time NSE’s response was rather mild. But it chose to stonewall the issue. It merely said, “We once again confirm the facts mentioned in our earlier mail”.We also asked the rationale of choosing Kurla instead of other suburbs which would be free of flooding during the monsoons. NSE said, "possibilities and choices were considered by experts before arriving at a suitable decision."

Why is the exchange, which is a public institution, being cagey about a property deal? Is it because of the political overtones to a deal with Kohinoor City? The Kohinoor group is headed by Unmesh Joshi, son of former speaker of Lok Sabha and Shiv Sena leader Manohar Joshi.

Kohinoor’s press release makes it clear that the NSE deal gave it a big boost at a time when the realty sector was going through a slowdown. The Joshis bought the 38-acre Kurla land from Premier Automobiles for Rs900 million in 2005, to develop a township project comprising about 900,000 sq ft of commercial space and about 300,000 sq ft for retail, residential, hospitality and education.

The project landed in a dispute and subsequently was stalled till last year, leading to a huge debt on the Joshis. Last year, the Bombay High Court gave a go-ahead to Kohinoor City and quashed a state government directive asking Kohinoor to stop development till dues of some 1,800-odd workers of PAL-Peugeot Ltd (PPL) amounting to Rs2 billion were paid. In this situation, finding quick buyers for the project was imperative. The tower, which NSE bought at Kohinoor City is expected to come up by May 2010.

The commercial space at Kohinoor City is NSE's second such acquisition post June 2001, when it relocated operations to its present office at BKC from Mahindra Towers in Worli and Trade World at Lower Parel. -Yogesh Sapkale[email protected]